January 2016

01/29/2016

You might have the best of intentions, but a poorly structured estate plan could end up requiring your heirs to use much of their inheritance to pay taxes on that very same inheritance.

Even the most successful families create disasters for their heirs. Unless you are a tax lawyer or estate planning attorney, chances are you don't know how to properly plan for the taxes that are due on the sale of assets. A report from Fox 61 News, "Tips to avoid an income tax and estate planning time bomb," discusses how important planning and timing are to helping your heirs avoid inheriting a tax bomb.

For example, parents may decide to deed a home to their son while they are alive to protect it from long-term care costs or to avoid probate. Because the child didn't pay the parents the fair market value of the place, it's considered a gift, and a gift tax return may be required depending on the value of the home. The more the property is worth at the time of its sale, the greater the gain and the larger the tax bill will be.

These parents unknowingly planted an income tax bill bomb for their children by gifting property during their lifetimes instead of allowing the children to inherit the property after their deaths.

However, if the parents had used a revocable trust to own the home, then the residence would be passed on after death. In this scenario, the heir would not owe any income tax, provided the property was sold for what it was worth at the date of death. This works regardless of how much the property is worth at the time of the parents' passing.

Young or old—it doesn't matter—if you don't have an estate plan, have one created now. Start with the basics, and if you need to, do the additional planning as it applies to your situation. Speak with an experienced estate planning attorney. In addition, remember these tips:

Review and update your beneficiary designations.

Review and update your insurance policies. Check the amount of coverage and make sure it still meets your family's current needs.

Consider purchasing long-term care insurance to help pay for the costs of long-term care in case you and/or your spouse ever need it due to illness or injury.

Plus, at a bare minimum, everyone over the age of 18 needs a Power of Attorney for Heath Care, a Living Will, and HIPPA authorizations. Also, a Revocable Living Trust may be better than a will at incapacity because it avoids the court's control over your assets. And while you are at it, review and update the guardian designation for any minor children.

All of these issues can be resolved with an experienced estate planning attorney. Be sure to discuss all relevant aspects of your life, including anticipated changes in health, finances and those of family members.

01/28/2016

You might not expect a lead singer who dies from an overdose of drugs and alcohol to leave behind a neat and tidy estate. We won't know until the dust clears on this $2 million plus battle.

In the sad tradition of too many performers, Scott Weiland was only 48 years old when he overdosed and died. From 1989 to 2013, Weiland was the lead singer for Stone Temple Pilots, a grunge powerhouse band from San Diego.

The Hennepin County (MN) Medical Examiner's Office said a mix of cocaine, ethanol (alcohol), and MDA led to Weiland's death, in addition to his history of cardiovascular disease, asthma and multi-substance dependence as "significant conditions."

Now Scott Weiland's widow may end up battling his ex-wife over the rocker's estate.

Weiland was married to Jamie Wachtel when he died late last year from the accidental drug and alcohol overdose. In order to substantiate her claim that Weiland named her as the executor of his estate, Forsberg filed a will written in April 2007 with his signature as proof. The couple split up a short time after the will was filed.

The legal documents show that Weiland had $2 million in assets as part of his estate. In addition, he created a trust during his lifetime that includes undisclosed assets.

While she has not yet gone public on her late husband's ex-wife's filing, Jamie Wachtel still has the right to contest Mary Forsberg's claim.

01/27/2016

Adults with spouses and children need life insurance to protect those they love. Maybe that's corny, but it is true. Don't let the complexity scare you; your family will thank you.

Just as we are still reluctant to discuss death, we still have a predilection to push back against discussions concerning life insurance. Too morbid. Too complicated. But in "10 Things You Absolutely Need To Know about Life Insurance," Forbes presents a compelling argument to go past any preconceived notions that cause anyone to avoid this important personal finance tool.

With the proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.

Here are some of the things you absolutely need to know about life insurance:

You really need it if you are someone's spouse or the parent of dependent children. If you are retired or financially independent and no one would suffer financially if you weren't around—OK, you don't need life insurance.

Life insurance doesn't just slap a monetary value on your life. Rather, it helps compensate for the financial consequences that accompany the loss of a wage earner's life. It can help those left behind cover the costs of final expenses, outstanding debts and lost income. After an unexpected death, life insurance can lessen financial burdens at a time when surviving family members are dealing with great loss. It can also give peace of mind to the policy holder.

Life insurance is a risk management tool, not an investment. There are some life insurance policies that have an investment feature, but they're not really an optimal investment. There are usually better and more efficient strategies.

There are two kinds of life insurance—term and permanent, also known as whole life insurance. Term life is the simplest, the least expensive, and the most widely applicable. The life insurance company bases the policy premium on the probability that the insured will die within a stated term—typically 10, 20 or 30 years. The premiums are guaranteed for the length of the term, then the policy becomes cost-prohibitive to maintain—or you can decide to let it lapse. This means that you could pay premiums for decades and "get nothing out of it." That's good news because it means you were protected during that time.

Permanent life insurance includes the same probability-of-death calculations but also includes a savings mechanism, often referred to as "cash value." It's designed to help the policy exist into perpetuity. Whole life has an investment component, and variable life has investment options more like mutual funds. Universal life is a less expensive permanent life insurance alternative with added flexibility but increased interest rate risk for the owner.

Choosing the right life insurance policy doesn't have to be complicated. It's better to set up something you can work with and understand than to postpone such an important decision due to the policy's intimidating complexity. In many circumstance, a good rule of thumb is to purchase enough life insurance to replicate all or most of the insured's income for a term as long as the household expects to need that income.

We can't say it enough – it's better to discuss with your loved ones what would happen in the event of an untimely demise than it is to let them struggle through a terrible time with no planning or advance discussion. By meeting with an estate planning attorney and purchasing the appropriate life insurance plans, your loved ones will be prepared in some way – and they will be grateful to you for looking out for them.

01/26/2016

A probate court case is still pending, but a lawsuit brought by three sisters against a fourth has been voluntarily withdrawn. It is more likely a strategic move than an indication of any rapprochement.

This dispute between sisters for the assets of Ralph Phillips, a wealthy and generous Ohio industrialist and philanthropist, includes a difference of opinion as to whether or not a fourth sister, the executor of their father's will, failed to carry out their father's wishes, resulting in their inheritances being considerably less than they had anticipated. The lone embattled sister claims that her father made that crucial decision, not her.

Ralph Phillips was president and CEO of Phillips Manufacturing and Tower. He died in a motorcycle accident at age 65 in September 2009. His four daughters were named in his will. Angela R. Phillips Deskins, one of the daughters who was also active in his business operations, was named executor.

Four appraisers with different specialties including real estate and guns were tasked with conducting a valuation of Phillips' assets in the estate. They set the worth of the non-business-related holdings at $4.74 million in a 2010 inventory. The assets included farm equipment, properties in Knox and Huron counties and South Dakota, numerous vehicles, bank deposits, and roughly $720,000 owed to Phillips on a note from Shelby Land Company (Shelby Country Club).

The three daughters filed a civil lawsuit in 2012, claiming Deskins interfered with the estate causing them to be deprived of trust inheritances they had expected. They alleged that their sister, the executor, failed to carry out their father's wishes prior to his death to recapitalize his business assets.

The three daughters sought an order from the probate court for equal distribution of the trust portion of Phillips' holdings. These assets included stock valued at more than $16 million in various companies, according to one court document. The three sought $7 million in compensatory damages, plus punitive damages.

Deskins stated in court pleadings that she held officer positions within her father's companies and complied with all duties. In addition, she noted that, during his lifetime, her father rejected an estate planning proposal which her sisters claim would have affected their inheritances by recapitalizing the company so each daughter would receive a one-quarter share.

Court papers on behalf of Deskins make it very clear that Ralph Phillips was in complete control of his companies and how he wanted his estate to be handled. He did not wish to recapitalize his business assets and that was his decision and his rightful choice.

01/25/2016

You may not need a complete overhaul, but the arrival of a new member of the family should prompt a review to ensure that all of your children are protected.

Few things in life are more joyous than the arrival of another new baby in the family. Among the necessary tasks is a review of your estate planning documents. If you had a will prepared for your first child, it is possible that the existing documents simply need to be updated. But don't wait. Make sure that you also address guardianship issues, should anything tragic occur in your family.

In the post "Will another baby affect your current will?"New Jersey 101.5 advises checking on your will to see whether it identifies your "children" or "descendants" as your beneficiaries—and then defines those terms to provide that children born after you executed your will are included.

If it does, then it is probably not urgent to update your will to include your new child's name. However, if the will was drafted without that flexibility and only identifies your first child by name as the beneficiary, then you need to talk with your estate planning attorney and have your will updated.

While you're at it, review your beneficiary designations for your life insurance policies and retirement plans. In those documents, you may have named your first child specifically as a beneficiary. If so, an update may be necessary.

Also, be careful of naming your estate as the beneficiary of any retirement assets. If you do, it can have unintended adverse income tax consequences after your death.

If your estate includes significant assets, such as retirement accounts and trusts for your heirs, a new child in the family is also the time to sit down with your estate planning attorney to ensure that all of your wills and retirement account beneficiary designations are up-to-date and that tax planning has been optimized.

01/22/2016

When the family business is farming, estate planning can protect your heirs and your land, creating a legacy for generations to come.

Farmers are well versed in the cyclical nature of life, particularly those who deal with livestock. But thinking about your own demise is different than considering the eventual end of animals bred and raised solely for consumption. Talking about death among family members is difficult. But planning in advance for the next generation will help with survivors' ability to work the land and continue a legacy.

You should seek the advice of a qualified and experienced estate planning attorney who is well-versed in current estate laws and farm business operations in the state.

This conversation and the plans you make with his or her help could preserve family and business relationships, avoid giving any more to the government than necessary, and provide peace of mind to both you and future generations.

An estate planning attorney may suggest a trust for your specific situation. One common issue with creating a trust without help is that you can miss a legal nuance in the moveover process of the property. This will stall execution of a plan, so it's critical that you and your attorney think through the entire process to ensure what you want can happen without any problems.

Another common issue, especially with farmland, is thinking that dividing property equally is what you must do. Not so. If some of the heirs are not farmers, it might be easier to equally divide the money from selling off the land.

Protect your land and help your children, whether they intend to continue to work the land or seek a different business and lifestyle. Meet with an estate planning attorney who can help you with the process so that your wishes may be clarified and documented properly.

Oregon leads the list as the top "moving to" destination in 2015 for the third year in a row. This is according to a study of 123,000 moves conducted by United Van Lines. Nearly 70% of the interstate moves in Oregon were people moving to the state, and the number of people moving to Oregon has increased by 10% in the past six years.

The research also showed that five of the ten states with the highest number of inbound movers are west of the Mississippi River, with the tech boom playing a large part in attracting new residents to the West Coast. However, that's just part of it.

With all the people relocating to Oregon, finding a home in the state's largest city has become a more expensive proposition: home prices in Portland have increased by nearly 11% in October from the same time in 2014!

In addition to the Pacific Northwest, the South was also a popular moving destination in 2014, and the state of South Carolina ranked second.

With more and more Baby Boomers getting ready to retire, the number of people getting out of the country's colder climates and into places with warmer weather is increasing. In fact, some states in the Northeast are having a hard time retaining their residents, with New Jersey experiencing the highest number of moves out of the state last year, followed by New York State.

These are the top 10 inbound states for 2015, according to United Van Lines (Moving to…):

Oregon

South Carolina

Vermont

Idaho

North Carolina

Florida

Nevada

District of Columbia

Texas

Washington

And here are the top 10 outbound states for 2015 (Moving from…):

New Jersey

New York

Illinois

Connecticut

Ohio

Kansas

Massachusetts

West Virginia

Mississippi

Maryland

Whether you are moving to a new state to retire or relocating for a great career opportunity, speak with your estate planning attorney. You may need to make some changes to your estate documents to ensure that your wishes are in compliance with the laws of your new home state.

01/20/2016

Fairness in estate planning is not always the same as making sure that everyone gets the same amount of dessert. Would you tell a hard-working kid that their lazy sibling gets more?

If you are preparing an estate plan and want to make sure that every one of your children receives the exact same amount of your assets because that's fair, you may want to reconsider. A post from New Jersey 101.5,"Being fair in estate planning," discusses the differences that take place during child rearing and even early adulthood that may redefine what you think of as fair.

While there's no easy answer to the question of what is fair, treating the children equally can be fair. But so can unequal treatment.

Let's look at how a parent treats a minor or young adult child. There are times when a parent simply needs to spend more on one child. The reason may be apparent—for instance, if one child has a disability or serious illness. But it can be more muddied when one child participated in costlier school-age activities, went to a more expensive college, or planned a more expensive wedding than the other kids. Even so, provided each child was given equal opportunities, the unequal financial support may not be a problem. Nonetheless, some parents believe that it's important to keep everything as equal as possible.

Continued parental support can be tougher when a child becomes an adult. Consider why an adult child is having financial problems. Is it because of poor work habits, a gambling or drug addiction, a divorce, or a disability? There are lots of situations with a multitude of factors, and each needs to be reviewed and handled differently based on that specific family's dynamic.

Most parents feel their children should inherit equally, but this assumes each child has similar needs and circumstances, has received similar support in the past from mom and dad, and has proven to be a responsible and capable adult. If this isn't the case, an unequal inheritance may be fair.

Providing additional financial support to one adult child over another via the parent's will should be within a parent's discretion. If so, parents need to let each child know their plans. This will help avoid surprises or hard feeling at the time of the parent's passing. Hopefully, the other adult children will not feel slighted if they understand the rationale.

Your estate planning attorney has seen the "fair" scenario play out in many cases and will be able to advise you about potential problems that may arise. Even with the best intention, your perceptions and wishes may not be welcomed by your heirs. However, not having a will is not the answer. If you don't have a will in place, or one that is properly prepared, state law will be applied to determine how to distribute your assets. One tip: state your wishes in a properly prepared will, and discuss your plans with your children in advance.

01/18/2016

January 17 is typically when most New Year's Resolutions bite the dust. But surprisingly, those who make financial resolutions have a far greater success rate.

Money related resolutions fare far better than any other type of New Year's resolution, according to a survey conducted on behalf of Fidelity in 2015. Almost a third of those who made financial resolutions at the start of 2014 achieved their goals, and nearly three quarters met at least 50% of the goals that they set. Half of those who made financial resolutions believed that they were better off financially after their efforts during the year. That's a success rate worth celebrating!

Begin your budget. You should know where your money is going, even though many folks don't like the results when they see how much money they're wasting.

Bolster your rainy day cushion. Nearly 30% of people in the U.S. have no emergency savings, according to a Bankrate survey — and many of those who do have these savings don't have enough. Financial experts recommend having enough cash in the bank to cover three to six months of living expenses.

Make a plan for tackling debt. Researchers have found that you are more likely to pay down your overall debt when you start by tackling the smallest balances first. Those small victories keep you motivated to keep moving forward.

Get your retirement number. Can you believe that less than half of U.S. workers know how much they'll need to save to live comfortably in retirement? Aim to save eight times your salary before you retire to meet basic income needs — shooting for twice your salary by age 40, four times your salary by 50, and six times your salary by age 60.

Find out your credit score. Those numbers matter — a lot. A good credit score means you'll pay less interest on loans for a mortgage, a car, or college. Here what can help boost your digits: pay bills on time, keep your overall credit card balance to less than 30% of your total available credit, and don't close your oldest accounts because it will shorten your credit history.

This is a good opportunity to review your financial portfolio and determine whether your asset allocation is still appropriate. It's normal to have some anxiety, especially after a year as volatile as 2015. During times of volatility, try to keep focused on long-term goals.

In addition to reviewing your investment options, you should review your retirement strategy and your estate planning. It's never fun to talk about estate planning, but it's important. Many people think a will is a "set it and forget it" type of thing. Not so.

Updating your estate plan should be done every few years, depending on your circumstances. Few lives are without changes in family relationships, jobs, economic status, birth, death, etc. All of these changes require a review of your estate plan. If you were so lucky to welcome a few grandchildren into the fold, you'll want to be sure they are included in your will. And if your year included a divorce, it's likely you don't want to give your ex-spouse your retirement accounts. Meet with an experienced estate attorney to ensure that your estate plan is up to date.

01/15/2016

States are looking for ways to protect seniors from a dramatic rise in financial elder abuse, but the financial industry is not yet comfortable with the role of reporting.

The number of financial fraud complaints from people who are 60 years and older in 2014 more than doubled from 2010, as tracked by the FTC (Federal Trade Commission). The huge leap may in part be attributed to an improvement in reporting these complaints, but regardless, the jump is enormous and must be taken seriously. The financial industry is pushing back against calls for legislation, saying that proposed new laws could result in a vast number of false reports.

The Wall Street Journal says that American retirees are exercising greater control over their finances with the decline in traditional pension plans. The article, "Officials Seek Clampdown on Elder Fraud," explains that the complexity of managing and investing savings poses a challenge, particularly as the U.S. population ages. Especially with more people projected to get dementia, this may open up the door to more exploitation.

Fraud can be anything from sweepstakes scams and bogus investment schemes to dishonest caregivers or family members stealing the senior's savings. In some instances, investment advisers or stockbrokers have been found guilty of churning accounts through unnecessary trades, resulting in high fees or losses.

Statistics show that seniors lost at least $2.9 billion to financial abuse in 2010. That was an increase of 12% in two years, according to Met Life. To help prevent this, a coalition of state securities regulators is proposing a model state law that would require financial advisers — including brokers at large investment houses and independent advisers and their supervisors — to report suspected elder financial fraud to both a state securities regulator and an adult protective-services agency.

The bill would require immediate reporting by a financial adviser who "reasonably believes that financial exploitation" of an older person "may have occurred, may have been attempted, or is being attempted." The proposed legislation affords brokers and advisers civil immunity from privacy violations for reporting suspected fraud and gives them the authority to place a hold temporarily on suspicious account disbursements.

Supporters say advisers and brokers are in a prime position to flag early warnings about exploitation. However, financial-industry trade groups are pushing back, arguing that the reporting requirement would overburden state agencies. And some financial advisers worry they could be hit with a lawsuit if they miss an abuse case since about 40% to 50% of all "red flags" of suspicious activity turn out to be false. This is according to the Securities Industry and Financial Markets Association, the main Wall Street trade group. But a "voluntary" reporting system would let securities firms look into these claims in-house before going to authorities.

Roughly half of the states require elder fraud reporting by certain financial professionals, but these laws don't always extend specifically to financial advisers. And all states have an adult protective-services agency to investigate reports of abuse, neglect, and exploitation of the elderly; however, dementia, embarrassment, or reluctance to report family members all contribute to low disclosure rates. In fact, a 2014 survey found that 44% of agency officials said financial institutions were frequently unwilling to provide a client's records, and 40% reported long delays obtaining these records.

Financial advisors say that when they suspect that one of their elderly clients is being taken advantage of, they are actually hampered by strict rules that govern the execution of trades and withdrawal processing. FINRA, Wall Street's own self-regulator, has recently drafted a set of rules that would allow firms to put a temporary hold on suspicious account disbursements, but there are no provisions for making reporting suspected fraud mandatory. There are also privacy laws that advisors say could be violated. This problem is not going away anytime soon – expect to see changes in the law and challenges in the coming year.